According to a report by Bloomberg, the Afghan afghani has emerged as the best performing currency this quarter, climbing by 9%. This surge can be attributed to billions of dollars in humanitarian aid and increased trade with Asian neighbors. The ruling Taliban has taken measures to strengthen the afghani, including banning the use of dollars and Pakistani rupees in local transactions and imposing restrictions on bringing foreign currency out of the country. Online trading has also been prohibited, and violations of these rules can result in imprisonment. Despite these efforts, experts believe that the rise in the currency is only temporary due to the ongoing economic, social, and political instability in Afghanistan.
In contrast, the Pakistani rupee, the currency of Afghanistan’s neighboring country, has experienced a significant loss of 22% of its value this year alone. While the rupee has seen a recent slight gain of 6% this month, the Afghan afghani’s performance stands in stark contrast to its neighbor’s currency. The foreign exchange market in Afghanistan primarily relies on money changers, with the Sarai Shahzada market in Kabul serving as the country’s financial hub. Remittances are also brought into Afghanistan through the Hawala system. The tightening of restrictions on foreign exchange transactions and gradual improvements in trade have driven up demand for the afghani, according to experts.
Despite the positive performance of the afghani, the World Bank has reported rampant unemployment, high inflation, and a significant portion of the population struggling to afford basic items in Afghanistan. Therefore, experts believe that the stability of the currency will likely be short-lived and may not address the underlying economic challenges faced by the country. Meanwhile, Afghanistan’s central bank has increased the withdrawal limit for dollars, showing some signs of easing pressure on the currency. However, it remains to be seen how long this stability will last and whether it will have a lasting impact on the country’s economic situation.